What Your Nonprofit Needs to Know About Bitcoin

What Your Nonprofit Needs to Know About Bitcoin

What is Bitcoin? Bitcoins are mined in the digital world by a process where computers are used to solve intricate math problems. Once mined, Bitcoins can be sold, traded on an exchange, used to buy goods or services, or contributed to charity. How does Bitcoin work? From a user perspective, Bitcoin is essentially a mobile app or computer program that provides a personal Bitcoin wallet and allows users to send and receive bitcoins. The Bitcoin network is sharing a public ledger called the “block chain.” This ledger contains every transaction ever processed, allowing a user’s computer to verify the validity of each transaction. Can our nonprofit receive donations in the form of Bitcoin? Yes, Bitcoins can be donated to a nonprofit.  From the IRS’ point of view (IRS Notice 2014-21) virtual currency, which would include Bitcoin, is considered property, not cash. Therefore, a nonprofit receiving a donation in the form of Bitcoin, and the donor, must follow the rules that are applicable to the charitable donations of property. Bitcoin donations – Donor perspective The IRS requires donors that contribute more than $500 in property (other than cash) to complete Form 8283 Noncash Charitable Contributions, which requires a description of the contributed property and the method used to determine the fair market value.  If the fair market value of the donation exceeds $5,000, the donor must generally obtain an appraisal.  There are daily quotes available for Bitcoin on established exchanges that would suggest an exchange market quote rather than an appraisal would suffice. However, Bitcoin (and all virtual currency) is not currently on the list of property exempted by the...
Nonprofit Q & A: Donor Restricted Contributions

Nonprofit Q & A: Donor Restricted Contributions

Q:  We are a social service agency that receives about $2 million a year in donations restricted to supporting our programs. The donations are solicited through grant requests, a fundraising luncheon, and an annual giving campaign. Our administrative and fundraising costs represent about 15% of our total expenses. We have a policy to allocate those overhead costs to the temporarily restricted program funds. My accounting manager has some concerns that this is not in compliance with generally accepted accounting principles (GAAP). Are we allocating correctly? A:  From a GAAP perspective, donor restricted contributions are considered temporarily restricted until the donor purpose or time restriction has been met. When an NFP accepts a contribution, it has a fiduciary responsibility to use the funds as the donor intended. Unfortunately, a NFP cannot assume a donor intends to fund the organization’s supporting costs when a contribution is given to specifically support a program. As such, if an NFP has a policy of allocating supporting costs to temporarily restricted funds, it needs to communicate this to the donor prior to receiving the contribution. The AICPA’s Financial Reporting Executive Committee (FinREC) believes that when NFPs communicate this policy to donors when soliciting contributions, it is also appropriate to allocate the supporting costs. However, if the donor is unaware of the policy, the contribution should only be used to support program-related costs.   Nadia Oliveira, CPA specializes in providing audit and assurance services for nonprofit organizations and commercial companies, across a variety of industries. She has experience in providing such services to both public and private companies....
Nonprofit Donor Gifts & Charitable Contribution Criteria

Nonprofit Donor Gifts & Charitable Contribution Criteria

Just because something is called a donation, doesn’t mean it yields a charitable deduction. In fact, many charities offer programs wherein participants are required to make a “donation” prior to partaking. When trying to determine whether a donor can claim this payment as a deductible charitable contribution, we need to evaluate all the facts. The Internal Revenue Code does not provide a definition for what constitutes a charitable gift. Instead, it provides rules regarding the deduction limits, which types of donations are eligible for a deduction, and the substantiation requirements for the donation itself. For the definition of a gift, let’s look to case law. The court system has defined a gift to be something that is: 1. Voluntary in nature, and 2. Motivated by a detached and disinterested generosity. Using the above definition, any donation that is required, and therefore not voluntary in nature, would fail to meet the criteria for a “gift.” The IRS would most likely view the payment as a program fee, rather than a payment yielding a charitable deduction for the donor. Some charities tackle this issue by advertising a “suggested” donation instead of a required donation. By removing the donation requirement, it is possible that the amount may qualify as a gift. However, the donor’s charitable deduction may still be limited if they receive something of value in exchange for the suggested donation. For example, let’s say an organization hosts a benefit concert and advertises a $50 suggested donation to attend, which is the same amount that similar concert tickets are typically priced.  An attendee who pays the suggested donation is not entitled...
Fraud: It’s Not Just for Insiders

Fraud: It’s Not Just for Insiders

In our ever-expanding digital world, many of us have had at least one of the following experiences: – Unable to login to your online banking system – Pop-ups or unexpected requests to change your password – Computer slows, locks up, reboots or won’t shut down – New toolbars or icons – Requests for payment with no, different, or duplicate invoices – Transaction requests with out-of-country banks – Immediate or email payment requests – Wire requests that say, “Strictly confidential financial operation” – Emails or links with domain names that are similar to, but not the same as, current employees or vendors – Requests that bypass normal procedures If you have, these are all warning signs of potential fraud from outsiders. We’re currently seeing a growing number of schemes that target smaller organizations, such as nonprofits, governmental entities, and small businesses. Here is information about some of the schemes we’re seeing and insight on how to protect yourself.   Small Donations on Stolen Credit Cards  By now, we’re all aware that we need to check our personal credit card statements for small charges we didn’t make. These charges are the work of fraudsters, who are testing the credit card number. If their charges go through, they sell the number to someone who then goes shopping with the credit card number. The new twist on this scheme occurs when a fraudster tests a batch of stolen credit card numbers by using each card to donate a small amount to a charity. Through using the method, the fraudster hopes that the cardholder will be less likely to challenge a donation, as it’s...
Brave New World of Fundraising and Social Media

Brave New World of Fundraising and Social Media

How do you raise $100 Million dollars in 6 months? Get a few thousand people to challenge each other to pour buckets of ice water over their heads, video tape themselves doing it, and post it on social media websites using #ALSiceBucketChallenge. Easy right? No one expected the ice bucket challenge to take off so stupendously and you can’t always know what project or endeavor is going to be a grand slam home run. However, we are truly in an era where social media is the easiest form of communication and charities must embrace the power of individual fundraising through this medium. Whether it is for the ALS Ice Bucket Challenge, the local fun run or the PTA Read-a-thon, individual fundraising is on the rise and people are using their social media accounts and email contacts to solicit donations for their favorite charities. Charities, looking for alternative ways to fundraise, and individuals, fundraising on behalf of their favorite charities, use crowdfunding or online fundraising sites such as GoFundMe, Indiegogo, Crowdrise, Fundly, and others. How does online fundraising for or on behalf of charities work? The first and most important step is that the charity selects the online service provider it wants to work with, such as GoFundMe or Indiegogo.  These unregulated sites act as agents for charities and distribute information to the public about the fundraising goals of the charity. Once a charity establishes a relationship with a crowd funding site, an individual can set up an account with the site and fundraise on behalf of the charitable organization. There are a number of online fundraising sites so charities...
Uniform Guidance: The De Minimis Indirect Cost Rate

Uniform Guidance: The De Minimis Indirect Cost Rate

The lack of indirect cost recovery from Federal grants is nothing new for Not-for Profits (NFPs). This has been especially true for those NFPs who do not have a federally negotiated indirect cost rate, as they receive all, or predominant amounts, of Federal grants from pass-through entities. The Office of Management and Budget’s (OMB) Uniform Guidance now recognizes that NFPs do indeed incur indirect costs and has made available use of the de minimis rate. In accordance with 2 CFR 200.414(f), NFPs who have not received a negotiated indirect cost rate previously can now utilize the de minimis rate.   The Calculation The de minimis rate can be charged at 10% of Modified Total Direct Costs (MTDC). MTDC is defined at 2 CFR 200.68 as being: “all direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel, and up to the first $25,000 of each subaward (regardless of the period of performance of the subawards under the award). MTDC excludes equipment, capital expenditures, charges for patient care, rental costs, tuition remission, scholarships and fellowships, participant support costs and the portion of each subaward in excess of $25,000.” The first $25,000 of subawards can be taken when each subaward is initially issued, separately negotiated, or renegotiated over the Federal grant’s period of performance (i.e. not $25,000 for each entity’s fiscal year). Some NFPs have found it helpful to have two separate subaward general ledger accounts: one account that tracks the first $25,000 of subawards and another account that records costs in excess of the first $25,000. The NFP will want to ensure that direct costs of the Federal...